TaxmannEA Posted July 8, 2014 Report Share Posted July 8, 2014 I have just been approached by a person who did not file for the years 2004-2006. He was working as an independent contractor those years. A member of the family received a letter from the IRS which stated that they believe that he owes about $170,000 for that period. I know that he would have had business expenses, but he has no records from that time.(What a surprise!) He has no assets and his current income is around 11 to 12 thousand per year His current job has received an inquiry about him.. How do I proceed with this guy? I know that he needs to get straight with the IRS, but I'm a little unsure of his real options. I'm thinking a possible OIC, but is there anything else to consider with a debt that old? I'm just needing feedback to determine my advise and also whether or not to send him down the road. Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted July 8, 2014 Report Share Posted July 8, 2014 First requirement for OIC is that ALL tax returns must be completed. This guy's irresponsibility for those years will cost him dearly. Chances are that the IRS has already done an SFR for him. Find out for sure what the IRS has sent him. Is this person currently your client? There is more to the story, you can count on it. Lack of records will only hurt him in this process. He must start re-creating his records. FIRST - Insist on a BIG retainer up front. This will take years to clean up. 1 Quote Link to comment Share on other sites More sharing options...
JohnH Posted July 8, 2014 Report Share Posted July 8, 2014 Great advice from Jack. This guy probably is going to get mad at anyone who gives him the bad news, which is just beginning. It's going to get a lot worse and it will likely be everybody else's fault. Unless he's expecting an inheritance, he doesn't earn enough to pay for the work he needs done. Best approach is to walk away, unless you like charity work. 2 Quote Link to comment Share on other sites More sharing options...
RitaB Posted July 8, 2014 Report Share Posted July 8, 2014 Jack and John make good points. But you know me. I going to suggest something else. If he can get you records that meet your standard for preparing a timely filed return, and you can get paid to do the returns, I say go for it. I would not worry about how to help him avoid his debt. Or if you feel like helping him out of the crack he got his own tail into, help him do that later. After all, HE'S late at everything, right? I know that's not very sophisticated advice, but I have never understood why we treat a late return differently than any other. I would avoid a lot of hand holding, unless you normally do that for everybody. If he owes $170,000 in taxes, he made a lot more money than I do, and while I was making estimated tax payments, well, you know... And, the part about a family member getting a letter? You might check on the existence of a spouse, cause that's all I can come up with on that one. 2 Quote Link to comment Share on other sites More sharing options...
TaxmannEA Posted July 8, 2014 Author Report Share Posted July 8, 2014 The family member is a parent who happens to have the same first name. When he opened the letter, he realized that the SS# was not his. He sent the letter back. 1 Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted July 8, 2014 Report Share Posted July 8, 2014 There are bound to be SFRs so I'd want to see those first, as a starting point, before deciding how/whether to proceed. Also, if he can't "afford" a decent retainer up front, I'd send him down the road, because this mess THAT HE MADE is going to take a lot of time to clean up. 3 Quote Link to comment Share on other sites More sharing options...
JohnH Posted July 8, 2014 Report Share Posted July 8, 2014 H-m-m. The family member sent the letter back? He didn't call Joe up and say "Here's something pretty urgent from IRS you may want to see". He didn't even know an address to send it on to his relative. He didn't have any concern at all, just thought "Not my problem, sending it back" Alarm bells are going off left & right. This client is looking more and more like somebody that even his kin don't want to get involved with. Maybe you should follow their lead. 2 Quote Link to comment Share on other sites More sharing options...
TaxmannEA Posted July 8, 2014 Author Report Share Posted July 8, 2014 I'm sure that there are SFR's since he has not filed since 2003. I don't feel sorry for him. I am just wondering if filing 10 years of taxes and trying an OIC is the only way to go in this situation, or if there might be some administrative remedy that he could seek. I'm just weighing the options, and I don't work for free! 4 Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted July 8, 2014 Report Share Posted July 8, 2014 10 YEARS? Your original post said he skipped 3 years? Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted July 8, 2014 Report Share Posted July 8, 2014 No OIC will be possible. No mention of Bankruptcy, so the client has assets or resources. We did one like this where the IRS grabbed $139,000 from the client's checking account. She had not filed since 1997. If he will not put up a HUGE retainer, RUN FORREST RUN!!! "Lack of responsible actions and planning on your part, does NOT create an emergency situation, or sympathy for YOUR situation on mine." (modified to fit the situation) Quote Link to comment Share on other sites More sharing options...
TaxmannEA Posted July 8, 2014 Author Report Share Posted July 8, 2014 10 YEARS? Your original post said he skipped 3 years? I apologize. The IRS is focused on the 3 years mentioned when he was self-employed. This person has not filed in quite a while. It could be that he was employed and would have received a refund in the intervening years, but I don't have that information. As he has no assets other than the clothes on his back and an old pickup truck I would think that bankruptcy would be an option. That would also save me the aggravation as I am not a lawyer. It's like watching a train wreck. Horrible situation, but fascinating to watch. Quote Link to comment Share on other sites More sharing options...
Richcpaman Posted July 8, 2014 Report Share Posted July 8, 2014 Taxmann: This line: "It's like watching a train wreck. Horrible situation, but fascinating to watch." Actually, you can be the dispatcher and stop the train wreck from happening... $170K sounds like a lot of money, but if you made $75k each year on 1099's for three years and you were SFR'ed, you could get there pretty quick with penalties and interest. The main issue is dollars to pay you. If you do the work, you should get paid. That is where you are the conductor. First you would get the transcripts for the years in question, then you would prepare amended or original returns for filing with the best info you could get from the guy, then move on to the later years with new transcripts and new returns for the other years. Then you do the OIC when all the years are filed and the IRS Agent is talking to you. Nothing that difficult about this case. Lack of dollars make it easy to make the OIC deal. Finding a way to get paid is important, but a monthly retainer would be a good place to start. The OIC and all the processing time can have you collecting $100-200 a month for several years... There is LOTS of business like this if you are interested. If not, find someone local who is interested in these cases and do the referral. Bankruptcy would not save him. The SOL has not started to run yet because he hasn't filed so nothing is dischargeable. If he had filed in the past, it could show some cause the IRS that things are bad for him... Be the dispatcher and direct this guy away from the train wreck. HE might not listen. That would not be my problem. I would do what *I* would feel is the right thing and let go of the outcome. Rich 1 Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted July 9, 2014 Report Share Posted July 9, 2014 I am still dealing with one of these. Filed 11 years of tax returns for the client. IRS did not garnish while we were working on getting the returns prepared. Owed over 100K when it was all said and done. We did the offer, and wouldn't you know, the IRS said no. Not suprising. So we just sent in an installment agreement. Waiting for the IRS answer on that. IRS has not garrnished yet. We have been able to hold them off for two years. The clients are making very small payments right now. The first thing you need to do, if you accept this client, is to get the open year returns filed. If he is really not making anything right now, he may have refunds to put in the pot. Then start working your way back to the years that they are looking at. Get them all done, and keep in contact with the IRS. As stated before, no offer until all years are filed. Usually, if the IRS is not after them, they want 7 years. That is how far the software looks back unless they have a collection issue open in a year older than 7 years. If they have an open collection issue, they want back to that year. Get your money. If this goes sideways, they will blame you for not getting them "off the hook". Tom Hollister, CA 1 Quote Link to comment Share on other sites More sharing options...
mcb39 Posted July 9, 2014 Report Share Posted July 9, 2014 So far, so good on my four year non-filer. Have finished 2010 and no liability. We are skipping 2011 temporarily so client can do more research. Fine with IRS agent. Makes it more difficult for me to move on to 2012, though. Client is retired with SE income as a Sales Rep., so of course a 1099. No withholding anywhere. No problem with getting the retainer. Just wonder what this guy was thinking!!! 1 Quote Link to comment Share on other sites More sharing options...
Jack from Ohio Posted July 9, 2014 Report Share Posted July 9, 2014 Just wonder what this guy was thinking!!!He wasn't... 2 Quote Link to comment Share on other sites More sharing options...
michaelmars Posted July 9, 2014 Report Share Posted July 9, 2014 look at the state issues to, some states offer amnesty from penalties if you come forward and since they will be behind the irs in getting paid they might settle easily for a quick payment. we did one where irs was owed $250,000 and ny about $80,000 they took $25,000 over a few years, I forget the amount. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted July 9, 2014 Report Share Posted July 9, 2014 In my case, there will be no tax owed as all he is owing the IRS is SE tax. However, state may have some issues with his non-filing because of his SE income. Quote Link to comment Share on other sites More sharing options...
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